CG45710 - ETMD: main conditions for section 140E to apply

The types of merger to which section 140E can apply are explained at CG45706+. These correspond to the four alternative conditions at TCGA 1992 section 140E(1)(a)-(d). However, any such merger must meet further conditions before the section does in fact apply.

  • Each of the merging companies must be resident in a member state; section 140E(2)(a), but they must not all be resident in the same member state; section 140E(2)(b). For example: companies A and B are resident in the UK and company C is resident in France. A merger involving companies A and C or companies A, B & C would meet this condition. A merger involving companies A and B would not.
  • Section 139 must not apply to any qualifying transferred assets; section 140E(2)(c). Section 139 can only apply where the criteria within Sch 5AA for there to be a 鈥榮cheme of reconstruction鈥� are met, and generally it will be the inability to comply with Sch 5AA that will prevent section 139 from applying. For the definition of 鈥榪ualifying transferred assets鈥� see CG45711.
  • For mergers to form a SE or an SCE, or a merger by one or more companies with a single existing company, the transferee must issue shares or debentures in itself to the shareholders or debenture holders of the transferor company or companies; section 140E(2)(d)(i). This condition is waived if and to the extent that the transferee is prevented by local company law from issuing shares to itself (section 140E(2)(d)(ii): see CG45704 for a more detailed explanation).
  • For mergers by two or more companies which transfer all their assets and liabilities to a single new company, the transferee must issue shares or debentures to the shareholders or debenture holders of the transferor companies; section 140E(1)(d). This does not apply to mergers to form a SE or an SCE.
  • For mergers, other than those to form a SE or an SCE, in which one or more companies transfer all their assets and liabilities to a single new or existing company, all the transferor companies must cease to exist without going into liquidation within the meaning of section 247 Insolvency Act 1986; section 140E(2)(e).
  • The anti avoidance rules in section 140E(8) must not apply. See CG45731.